Business spending on cloud computing rises to $9.6 billion in 2009, up 22%

With cloud computing in the enterprise we tend to think of it as being conceptual and experimental. Besides Salesforce.com they aren't a lot of popular examples of business apps in the cloud. However, a new Gartner report says that business spending on software as a service (SaaS) will rise 22% in 2009 to $9.6 billion.

This is up from $6.6 billion spent on SaaS in 2008 and it comes in a year when overall IT spending is down 3.8% according to Gartner estimates.

See also: Why corporate IT will eventually embrace cloud computing

Sharon Mertz, research director at Gartner, said,

"The adoption of SaaS continues to grow and evolve within the enterprise application markets as tighter capital budgets in the current economic environment demand leaner alternatives ... and interest for platform as a service and cloud computing grows. Adoption of the on-demand deployment model has grown for nearly a decade, but its popularity has increased significantly within the last five years. Initial concerns about security response time and service availability have diminished for many organizations. As SaaS business and computing models have matured, adoption has become more widespread."

As the chart below from Gartner's report shows, the most popular SaaS applications in the enterprise are content management, CRM, and ERP.

One of the fastest growing segments of the SaaS market is Office Suites, which is growing from $136 million in 2008 to $512 million in 2009. This means more companies are experimenting with solutions such as Google Apps and Zoho rather than using the standard Microsoft Office suite.

Mertz said,

"Many factors are driving adoption of SaaS, including the benefits of rapid deployment and rapid ROI, less upfront capital investment, and a decreased reliance on limited implementation resources. Greater market competition and increased focus by the 'megavendors' is reinforcing the legitimacy of on-demand solutions. Many enterprises are further encouraged by the fact that with SaaS, responsibility for continuous operation, backups, updates and infrastructure maintenance shifts risk and resource requirements from internal IT to vendors or service providers."

Of course, the thing to keep in perspective is that the total 2009 IT software market is $222.6 billion (according to Gartner), so SaaS is only 4.3% of the total software market. Gartner anticipates steady -- but not spectacular -- growth for SaaS through 2013, when it sees the SaaS market rising to $16 billion.